Both Ambuja Cements and ACC are bet worth investing with strong parent Adani
- The cement industry saw the largest deal get sealed this week which is to change the fortunes of the sector for good.
- The billionaire
Gautam Adanipaid as much as $10.5 billion to buy Ambuja Cements and ACC — from Switzerland-based Holcim.
- Analysts see robust long-term outlook for these companies along with hopes of higher-than-industry volume growth as Gautam Adani backs the firms.
A few days back, the billionaire Gautam Adani paid as much as $10.5 billion to buy Ambuja Cements and ACC — from Switzerland-based Holcim.
While as much as the cement companies will benefit other infrastructure companies at Adani with raw material, Ambuja Cements and ACC will become a dominant player in the industry.
With the acquisition,
Now, the acquisition has led to mandatory open offers in both the companies, wherein the acquirer Adani will buy shares from the market at a fixed price. Adani has proposed to buy 48.96 million equity shares at ₹2,300 per share of ACC. Similarly, it will buy 516 million shares of Ambuja Cements at ₹385 per share.
Ambuja Cements and ACC to scale up capacity and volume growth post change of promoter
While analysts believe stocks of both companies are bound to perform well with strong parentage, there are possibilities of various scenarios to take place that could impact the share price movement.
These are some of the possibilities charted out by Nirmal Bang Institutional Equities.
Case 1: Adani group could delist the shares of both companies post acquisition
If the Adani group plans to delist the shares completely, then the premium paid for the open offer will be relatively higher.
Case 2: Adani group keeps the shares listed post acquisition
The Adani group is already paying a premium for the acquisition of ACC and Ambuja assets from the Holcim group. If they plan to keep both entities listed, then offering a higher premium for the open offer is not in the interest of the group.
Case 3: ACC and Ambuja Cements to be merged and the combined entity continues to trade on the exchanges
The Adani group can merge the two entities after the acquisition and then do equity dilution to take its overall stake below 75% to comply with listing norms. This is an ideal scenario for minority shareholders of both ACC and Ambuja, as the merged entity is likely to trade at a premium valuation and its overall growth profile is expected to be better
Analysts suggest investors to pick stocks at dips and stay invested for a long term
“We do believe that the long-term outlook for these companies is positive given the possibility of higher-than-industry volume growth, further improvement in efficiency and a possible merger at a later stage, thereby streamlining the company’s corporate structure,” said a report by Nirmal Bang.
“Both of them are cement companies and can be scaled up after acquisition by Adani group but if we go by metrics ACC looks better,” said Manoj Dalmia, founder and director at Proficient equities. Dalmia believes ACC is better because earnings per share for ACC is higher at ₹99 and Ambuja has about ₹14.
Meanwhile, Ravi Singh, vice president and head of research at Share India feels Ambuja Cements has better metrics than ACC
“ACC and Ambuja both companies will be benefitted from this acquisition. However, Ambuja looks more robust on valuations terms, with bigger network coverage, higher profit margins, impressive cement capacity and better P/E growth as compared to ACC. On the Technical setup, ACC looks more aggressive and is in an accumulation zone which may push the stock upwards strongly. As both the companies look attractive for long term investments, we advise investors to invest in 60:40 ratio in Ambuja and ACC, to capture the opportunity. The long term target for Ambuja and ACC stands out at ₹420 and ₹2,450 respectively,” said Singh.
Even in Falling knife like this 2 Cement stocks in News are Fairly Holding Good.$ACC.NSE $AMBUJACEM.NSE Certainly the structure is Bullish.and these are Buy on Dips for Investors.— (@TrendonomicsHD) May 19, 2022
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